Outokumpu Oyj (OUT1V) Earnings Call Transcript & Summary

Hello all, and welcome to Outokumpu's Q2 2023 Results Webcast. 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; and our CFO, Pia Aaltonen-Forsell. Today, as per usual, we will first start with our presentations. And after that, we are happy to answer your questions. In the first half of 2023, we delivered a strong result. Today, we also announced that we have started our preparations for the third phase of our strategy, which will commence in 2026. But before we start with the presentation, I would like to remind you about the disclaimer as we might be making forward-looking statements. But now without any further comments, I would like to hand over to our CEO.

Linda, and thank you. Good morning. Good afternoon, everybody. Welcome on my behalf also to the Outokumpu Webcast. It's nice again to have a chance to have a conversation with you together with Pia. So we've had a very busy quarter, a good start to the year. We're excited with Pia here to give you an update on how things are progressing in our company as we implement our strategy. And we also today want to shed some light on how we are preparing and thinking about the Phase 3 of our strategy that we have announced some years ago. But let me just start first by stating, as you can see on the slide, that we've had a good start to the year. We've made nearly EUR 400 million of EBITDA during the first 6 months. It's a good start. It's a good result in a time which is still, in many ways, fairly challenging. If we then move on to look at the first slide here and talk a bit about the second quarter. So as you can see it stated here, adjusted EBITDA for Q2 was EUR 190 million. So again, good performance overall financially from the company. Q2 in many ways is a bit of a bifurcated story. As you hear today, our Americas business has been doing very well. We've, I think, had almost 15 quarters in a row of good performance there financially. And again, our Americas business contributed nicely to the bottom line. So very happy with the performance that our Americas team and our customers together have been able to generate. Over here in Europe, it's been a bit of a different situation, a different story, a bit more cloudy, I would have to say, and you'll see from the data in a moment that beginning of the year and accelerating into Q2, it had quite a number of challenges. But overall, as I said, we were able to get through Q2 nicely. One of the important statistics that we always like to follow, of course, is the commercial side and specifically price of various raw materials and price of various products. Let me just focus immediately on the left-hand side, where we can see the transaction prices for standard commodity stainless. And as you can see from the line, and I want to draw your attention specifically to the curve in the middle on the right-hand side that look gray line. And you can see almost like 2 stairs, first, they're down after the summer of '22, then a bit of a pickup and then another stair down. And it really tells you the story of how things have evolved in Europe as we've gone by. Now of course, where are we today? We knew that last summer when customers started to destock and especially, we knew that some of our customers actually had bought quite a lot of volume from Asia that it would take some time for that inventory really to get flushed through the system. Maybe a bit of a surprise, I have to say, is that it's taken actually now a year for that process to continue. And so I guess the big question is where are we today in terms of those inventories, especially for distributors and when will they start buying? I mean, basically, based on the information that we have we basically access to publicly, it would indicate that both in North America and also in Europe, that we have reached already the average or normal level of inventories. Some customers actually have now drawn down their inventories a lot more than average, some of them still have a bit more, but overall, I would say we're definitely down to normal levels. And looking at some data, I would almost ascertain that about May of this year, kind of we were already in the buy sort of in the buy window. So then you can sort of ask yourself, so why our customers -- are they buying, or if not, why are they not buying? There are probably many reasons -- it depends on the customer. There is a lot of uncertainty about the economy, specifically in Europe. In the U.S., this discussion, but is there a recession coming or not a recession coming? I guess that's a bit of an open macro question. But specifically here in Europe, this uncertainty, of course, it makes it easier for customers than to postpone, let's wait another week. Metal prices were also volatile in the second quarter. We saw -- just before June ended we saw nickel also dip a bit below 20,000, having now bumped -- come up again over 20,000. So this, of course, maybe makes it more easy for customers to postpone. And of course, we've seen interest rates spike quite a lot. I would assume that for some customers carrying working capital is, of course, substantially more expensive than it was, let's say, 1 or 2 years ago when interest rates were near -- almost at 0 levels. But anyway, what I can state here is as the second quarter ended and we got into the first days of July, so we have seen in Europe, some pickup in distributor buying. And so while it hasn't spread yet very broadly, we did clearly see some movement among some of our distributor customers. Also those who we know had bought a lot from Asia, they also started to place some orders. Prior to that, we saw the scrap market also starting to tighten a little bit. So is that sort of a trigger to get customers going remains to be seen. But anyway, I personally found it as a good fact that orders started to come in during the course of July. Now Europe is moving into vacation, especially in Southern Europe. So August is usually a quiet month as customers are taking some time off, and then when we come back in September I guess we will get a better sense for what is the mood among customers. But as said, it was positive to see in July some of our customers starting to place orders. On the ferrochrome side, you can see the price levels are fairly flat. There is a bit of a growing delta vis-a-vis the price levels in Asia. At the moment, the ferrochrome market as the second quarter ended, it was quite weak. So again, waiting to see some potential movements here as the summer ends and we move into the autumn phase. Now then if we look at our overall volumes, as you can see, 502,000 tons, we are compared to the level we are not terribly far from what we saw even during the course of COVID times. COVID, of course, was very exceptional because people were almost like panicking with the illness spreading around. Now, of course, we have more macro drivers and the cost of capital drivers which are potentially driving customer behavior. Overall, as I said, group adjusted EBITDA at EUR 190 million. And if you look at the right-hand side and you look at that bridge chart, 204 in the first quarter, 19 in the second quarter, I want to draw your attention to 2 things. One, of course, is that red bar, obviously, with prices declining as they were, ultimately, it flows through our P&L, and you can see some of that now in the second quarter results, that negative red bar. And Pia will talk a bit about how this -- how those orders flow through the system when she gets up here. Another thing to take a focus on is those green bars, they relate to costs. I want to just state for the -- as a fact that we have -- at Outokumpu, we are very focused on cost all the time. We run a tight shop. We have a strong procurement organization and I do feel that our buyers have been doing a good job allowing us to then save as needed. Then moving to another subject here, and let me just make sure I didn't go through one slide, let's see if I need, let's say, Page 7 should be okay. So talking a bit about ESG. I have to, first of all, state that as you all know, safety is #1 topic. We always within Outokumpu, we prioritize safety over volume. Now if we look at our Q2 numbers, on the first bullet, you see that our total recordable rate was 1.2. I would stop here and repeat that 1.2. This is an incredibly good number. If you scan companies around the world in processing industry, I would be bold enough to say that 1.2 is a really strong number. And if you look at the first half of the year, we're at 1.5. This is a very, very strong safety performance. We put a lot of emphasis on this. Our safety organization reports directly to me and we do our utmost to manage the company in a safe way. Obviously, we still have a long way to go to get to 0, but the progress we're making as an organization I think is solid, and it also tells a lot about how we run our plans. I think there's a strong correlation between the safety performance of a miller and also how they run the shop overall. A little fun fact on the right is our animal. It's called -- it's a new AI-driven safety robot. We basically have started to use this. We're now piloting it in one of our plants, and our plan is to roll it out to others. The idea with this robot is basically that it allows us to go and work and scan hazardous areas within the plant. And so by having our animal walk around and measure through its sensors, different important physical and chemical properties, we're able to identify risks and then focus our maintenance activities more accurately to those places where there could be a safety concern. So we have a few of these now and look forward to growing our animal family within Outokumpu. Then 1 year ago, we launched Circle Green. Circle Green is a new product, it has the lowest carbon footprint of any stainless steel grade in the world. It's up to 92% lower footprint compared to the industry average. So now one year has gone. We've been discussing with our customers, promoting it, and I can confirm to you that we're confident we're in the right direction. Obviously, it takes time for customers to learn and understand what this all means. But the 4 customer cases that we highlight here from the automotive industry, from the energy and transportation industry, renewable energy industry and so forth, conferred to me and hopefully to you as well that we're on to something here. And so I'm really pleased that we have a product that is interesting to customers and the marketing and promotion continues. I really believe we're in very, very early days in this journey of even further decarbonizing our industry and fighting climate change. And Outokumpu was really the leader globally in our industry when it comes to this. Now moving on then to our strategy and giving you a bit of an update on where are we now. So Pia will talk a bit about Phase 2 financial performance from the standpoint of how our initiatives are generating financial value to our bottom line. But I can just tell you, overall, as CEO of the company that I think we're making good progress on Phase 2. We demonstrated in Phase 1 that we have a good system of executing and driving performance in the company and we're using the same methodology, the same approach also in Phase 2, and we're getting concrete results. On the -- in the middle of the chart, there's a horizontal blue line where we say capital discipline and strong shareholder returns. I want to also underscore that capital discipline is very important to us and shareholder returns are on the top of our minds. So as we develop the company and we think about the future, we will not forget them. Now then talking a few words about Phase 3. So obviously, as you can see from the chart, our plan is to start Phase 3 in 2026 under the current plan. We've been spending some time this year, actually quite a lot of mental capacity and analysis to start thinking about what concretely Phase 3 could entail. And today, I want to just highlight the sort of 4 areas that we have identified as kind of the core elements of that part of our journey. And so now let me move to the next slide, which really highlights these 4 areas. From the left-hand side, Americas expansion. In the following, I will talk in a couple of slides what concretely American expansion means to us. But that -- because it's located here on the left-hand side of the first bubble, this is clearly the #1 topic for the company when we think about Phase 3. European competitive is important. Tornio in Finland is the most competitive stainless steel asset in all of European Union but overall, our system in -- this is a very competitive industry in Europe. We need to even further improve our competitiveness. So how we concretely do that, what we plan to do is also high on Phase 3 agenda. Then we have value chain integration. As you know, raw materials play a very important role in our cost structure, and we want to make sure that when we buy raw materials that we are finding sources where the CO2 emissions are low and where the actual raw material source is sustainably managed. I'm excited to tell you that in June, we announced that we had acquired a minority stake in FPX nickel. It is a Canadian junior mine located in the western side of Canada, and it is a unique asset potentially because that nickel source is estimated to have very, very low CO2 emission requirements. So it's going to be a very exciting asset once the mine development gets underway. And then on the right-hand side, sustainability leadership, energy efficiency is at the current moment, one of our top projects. In -- at the end of Q3, I told you our objective is to reduce our energy -- or increase our energy efficiency by 8%. We're making good progress on that and we're allocating capital to unlock that value. Now let's talk a bit about Americas. And when I talk about Americas for Outokumpu, it's United States and it's Mexico. And so combined, that is really the market where we operate. So maybe as a backdrop, first, I want to raise our sort of flight level a little bit here. I mean, we've been living over the last since, I would say, the early 2000s, late 1990s in a very globalizing world. And as we've seen from the news flows over the last 1.5 years, there is a lot of discussion increasingly about deglobalization, derisking, maybe even decoupling. As we see it, the United States is investing systematically to strengthen its domestic economy. They've initiated multiple, let's say, regulatory initiatives from the Inflation Reduction Act to Build America, Buy America Act, and so forth. So the U.S. government and the states are very serious in bringing back industry to the U.S. to strengthening its industrial backbone and to bring back jobs to the U.S. And this is not a 1 decade -- 1 year or 1 quarter evolution. This is a big pivot, a big fundamental change we see happening. And Outokumpu wants to be part of that journey. We are 1 of 2 leading suppliers of stainless steel in the United States. And so we are in a unique position to participate and contribute to developing the U.S. industrial backbone. I also want to state that Mexico is also a very interesting market. We're clearly seeing that increasingly, capital is slowing, not necessarily into China, but into countries like Vietnam, India, Indonesia and Mexico. And Mexico is interesting because we are the only producer of stainless steel in that country. We have a number of customers, both from Europe who are expanding their capacity in Mexico and also American customers were also investing in Mexico. So combined, the U.S. and Mexico really make an interesting market for Outokumpu. I want to state one fact that I picked up here recently, and that is that if you look at real total manufacturing construction spend in the U.S. So in 2021, it was about $100 billion and '23 million estimate is 200 billion. So on the manufacturing side, expenditures are increasing by 100 billion. So while you have these different initiatives here, you can clearly see that things are starting to happen in the U.S. Now in terms of then, what are we doing here? Well, we are working hard to evaluate different options. At the top of the list is hot rolling in the U.S. in Calvert. Why? Well, we have 900,000 tons of melt capacity, and we have 900,000 tons of hot rolling, which is done by an external party. And then we have 600,000 tons of cold rolling in the Americas. So we need to think about how to develop that further. Clearly, in order for us to grow our business, we will need to further expand and find a working long-term solution for hot rolling. And for that reason, we have underway a feasibility study to explore the option of investing in Calvert in that. We haven't made any decisions, but the work is progressing rapidly, and the readiness to decide is growing quickly. So that is as far as I can tell you about Phase 3 at the moment. So no decisions, but the readiness is increasing and hot rolling has a strategic logic against a backdrop of where the U.S. market and the Mexican market is going during the course of this decade, but then also with respect to our own footprint in the U.S. and where we see concrete long-term needs. With respect to cold rolling, of course, you know in Phase 2, we have already announced our plans to expand our existing operations capacity to 80,000 tonnes, and that work continues. So that is roughly where we are today. Now I would like to hand it over to Pia to talk about the numbers, and then I'll come back with a brief risk commentary and the outlook.

Thank you so much, Heikki. So having those exciting opportunities in mind and looking forward, even into strategy Phase 3, I thought it could be a good point still to start from our current balance sheet, from our current strengths and what's our starting point to think about the long-term future. So let's just dive right into it. And I think after Q2, we have paid dividends during the first half of the year, we also completed our first share buyback program ever, and we still stand at a negative net debt at the end of June. We also got, I think, a really nice credit rating upgrade by Moody's during the quarter. So I think our current balance sheet is in really good shape and the strongest in the industry. A good starting point. But as Heikki has also described, there is uncertainty in terms of the market environment. I will still get back a bit also with BA specific comments. But I think on a group level, it means that the practices that we have set in place in terms of capital discipline, we just need to further enforce them. We need to really work with those. And I think what we have done on top of the excellent work done by a number of project groups to assess investments and the markets. We have also focused a lot on modeling various options for future developments. And in all of those, really taken care to see that the commitment -- that we as management has also done versus the dividend payment remains solid in those scenarios. And I think that takes from us also this constant capital discipline and focus on the balance sheet. So in the second half of this year, you will see that we have a focus on the CapEx. I mean, what we can do here and now in this market environment is to take a few prudent measures, a little bit reduce the CapEx for this year to EUR 170 million. There's many and quite significant cost saving measures. I think Heikki will get back to those still and obviously, cash control in terms of working capital. I think we have a good team to consider all of these and to really have this constantly on our agenda. Let me take you through really a few of the key financials of the quarter. And I was thinking that what would be the most important ones to pick from here. And I think in terms of the market environment, I will also get back with some BA specific comments. But you can also see from this chart that the volume -- the actual volume even though it was aligned with how we were also seeing the second quarter upfront, it is a low volume. And I think especially looking at Europe, it has this sort of COVID-time feeling of it. I mean, the really low volumes that we are approaching also versus Q3. Still looking at some of the highlights of the quarter, I would pick up here some of the result-related figures, also looking at the earnings per share at EUR 0.21. You may remember that for the previous year our base dividend was at EUR 0.25, so I think we have already accumulated a good starting point during the first half of the year for the earnings per share here. And as said, net debt remaining negative. Heikki said I would come back to some progress that we are making in terms of our strategy execution. And you remember, it's now 1 year ago that we launched the second phase of our strategy. And before that, we had completed a pretty cost focus phase during the years of '21 and into '22. And with that, we already made EBITDA run rate improvements of EUR 250 million. And as many of those were cost driven, it's also a really good support now in this current market environment and also in this inflationary environment. Looking into the projects that we are working with right now, I think the best utilization of scrap along with the energy efficiency improvements are like obvious candidates for the top of the list. We do have a lot of projects in the pipeline as well. So you see we have accumulated EUR 82 million worth of improvements to date in the second phase. And I think we have a good pipeline of initiatives here to reach the EUR 200 million by the end of this phase at the latest. And I would say there's also a few really interesting ones, for example, in Americas, enabling the volume growth that we are targeting in the second phase already. And I think all of those are in good shape in terms of the preparation, even though, of course, we are not seeing the volumes of those realized yet as per today. So from what we can see in the second quarter, I would say there was a pretty big emphasis on improvements out of BA Europe. And I think that then brings me to the status of the financials and the situation in BA Europe and Heikki already pretty strongly shared this message here that we did see a weakening -- pretty fast weakening of the market environment during the second quarter. And this is certainly reflected already in the second quarter results. And I think just looking into the second quarter, there was a lower volume, there were lower prices and also some negative raw material impacts, maybe specific for Europe. You may recall, there was this like [indiscernible] spike as well, started actually already in February but some of that was sort of weaning out during the quarter with some negative impacts as well. We still had really good utilization in Tornio. And I think this also now continues as we even are in this sort of seasonal low point in Q3. We still continue to have a part, of course, from the scheduled maintenance break, a good loading in Tornio, but we are indeed seeing a very weak European market. So it means that at some other sites we are clearly now at some lower volumes into the quarter. And the market environment, as I said, it almost has a little bit of this like COVID type of vibe in it. And when Heikki said that there are already just now in July -- or well, it's August today, but in July, we could see, let's say, some improvement here in the order intake. And with that happening in July, and I would say what we are quoting right now in Europe is more later part of September, it's like September and October. It really means that if there's any improvement now, that's something then that we will see in our financials as realized invoicing more really towards the end of the quarter or I would more say, Q4. So what we feel in the third quarter in our result is then the outcome of anything that basically happened in the order intake during the later part, especially of the second quarter when the market was clearly softening. So I think this European environment for Q3 is clearly very challenging as I think we have also stated here. I thought I would still comment on the maintenance in BA Europe, and I think we are seeing regular shutdowns at most of our big sites here. And I think quarter-on-quarter, the sequential increase in maintenance cost in BA Europe is something EUR 7 million, EUR 8 million, maybe up to EUR 10 million. So that's kind of the magnitude really of the direct maintenance cost increase that we can see. But let me then take you next to the Americas. Obviously, there's a lot of really positive things we could say on the growth opportunities and the dynamism in the market. But if we really look at the here and now, if we look at the second quarter and going forward into the third quarter, the headline story here is still one of destocking and is there a story already of restocking. So just looking at really the absolute level of inventories based on the statistics that we all can find out there, it's clear that we are already at those sort of historic average level. We are, I think, even in absolute terms, sort of back to pre-COVID levels. However, there is this sort of macro uncertainty as well that Heikki also talked about and I think it's putting a little bit of a lid on the happiness, so to say. So the market environment is not particularly sort of strongly rebounding. And I think when we as a group are guiding for volumes to be decreasing, it's the seasonal decrease, and you know that's particularly Europe, but we do not see any sort of rebound in the volumes in Americas either for this quarter yet. So I think the market remains somewhat cautious at this point in time. But you can see from our realized excellent results that I think we have kept the good margins. The price level remained robust also through the second quarter. And we also had some positive raw material impacts, again, where I would not be too bold in promising that those repeat in the third quarter, but I do think they benefited us during the second quarter here. And ferrochrome, this was a good quarter of rebound in 2 ways, we managed to do really full production again with energy prices being back more to normal. So that both impacted the production volume, also impacted our cost side, which clearly improved. But at the same time, obviously, we have some impact here from just having to build inventory. It's visible in the group's balance sheet a bit in the working capital, and it's also visible in the somewhat lower delivery volumes because we need to prepare for the bigger maintenance stop that we will have during the third quarter. And the overall impact of that, the full impact is about EUR 10 million negative quarter-on-quarter from Q2 then to Q3, but good rebound here. And then on the cash flow here. And on the right-hand side, just really briefly, you see that we are now stating in our report that the CapEx for this quarter is at -- or sorry, for this year is now forecasted at EUR 170 million. When you look at the '22 graph, you see that we still had the significant share of the Kemi Deep mine strategic investments still in '22. So I think around EUR 50 million. And I think there's only a small tail of that remaining in our cash CapEx in this year, maybe EUR 10 million. So you see that there is still room for other investments also within this EUR 170 million. And on the working capital, during the quarter, we had some increase. There is a normal seasonality to a little bit increase on the working capital side here. But if I really look into the details of this quarter there are some of these other market dynamics in the background because if you look quarter-on-quarter, the biggest impact here actually was the negative impact from a decreased accounts payable. And that's, I think, testimony then to the market situation where we have maybe also been buying a little bit less. But we have built inventory in ferrochrome and we have also built some other inventory ahead of the annual maintenance stops in Q3. And I think with that said, Heikki, I would hand back to you.

Thank you, Pia. I think based on what you just said, I think we can see that we are, as a company, we're managing the changing conditions with confidence. Are we not?

Absolutely.

Exactly. I like this picture because I think you have -- for those of you who do sailing, you know that in sailing, what's really critical is how you make -- how you manage those turns. And in the steel industry and stainless in particular, I mean, it is a bit like sailing. You're turning the boat left and right and you really have to manage the turns quickly and effectively. And if you can do that, you can compete very well. And I think we are -- as a company, we're pretty good at turning the chip. We're agile when it needs to be the case. And I think as an example of that, I want to show you the following slide, which is that we are accelerating even more and putting more energy and focus on procurement. And I'm very, very happy to tell you that Marc-Simon Schaar, who has been heading among others, our raw material procurement. So he is now the new Chief Procurement Officer of the company and a member of our leadership team. And Marc-Simon and his team has had an interesting and important -- very important task to really fight inflation. And so what we're saying here today is we aim to reduce our consumable costs by 15% to 20% in Q3. In addition to that, of course, sustainability and being able to manage the raw material procurement in the most sustainable way is important. And Marc-Simon and his team are also working a lot on that. And I already talked about energy efficiency work also on that front, we're making good progress. Maybe to take a bit of a step back here at the end and look at risks both upside and downside risk. So on the positives, clearly, as we've discussed here, we did see a bit of that pickup in order intake in July. So let's see where that takes us as folks come back from vacation. A lot of headlines out there on China stimulus. I think many of us thought things were going to start post-COVID in January, February, then Q2 was weak. Now the Chinese state has stated that they intend to stimulate also the local economy again and maybe with some concrete and sizable measures. So let's see how that flows into the market and whether those actions then really also move China forward. China is over half of the Asian GDP. So what really happens in China is very material when it comes to demand of stainless steel and metals among others. Low distributor inventories, as we've said, when will restocking begin? Are we close to that point now? And then we've talked about our own actions and then Circle Green. On the uncertainty side, of course, scrap markets are tightening. We do, however, feel that we're well sourced. We have good supply sources, we have good partnerships, and we have a very professional and good organization buying. So I feel good about our situation or scrap. And as you saw, our amount of recycled metal was 94%, which is the highest of any company in the industry. Inflation pressures seem to be moving downward, and we're going to take advantage of that as we head into the fourth quarter. And then, of course, energy and electricity was the big topic last year, last winter. It's very good that in Finland now Olkiluoto-3 Nuclear Power plant is running full. So as we head into the winter months, we are going to be having -- taking advantage of, of course, Olkiluoto's electricity supply in the Nordics, which makes the Nordic market much more balanced in terms of supply and of course, helps keep a lead on the price of power here up in the north. So against those facts, so let me just summarize the outlook for the third quarter. Group stainless steel deliveries in the third quarter are expected to decrease by 5% to 15% compared to the second quarter in line with the seasonal pattern. For Business Area Europe, the market environment is challenging in the third quarter. The planned maintenance break in business area of ferrochrome is expected to have an approximately EUR 10 million negative impact on the business areas, adjusted EBITDA. Maintenance cost for the rest of the group in the third quarter are expected to increase by up to EUR 10 million compared to the second quarter. And with current raw material prices, some raw material-related inventory and middle derivative losses are expected to be realized in the third quarter. So the guidance for Q3 2023 adjusted EBITDA in the third quarter of 2023 is expected to be lower compared to the second quarter. So with that outlook and background, Pia and I are happy to take your questions. Thank you.

[Operator Instructions] The next question comes from Tom Zhang from Barclays.

Two for me. The first one, just on Ferrochrome. Obviously, the Q2 contract price in Europe was reset quite a bit higher. So I'm a little bit surprised the sort of revenue per tonne wasn't a little bit stronger. I recognize, as you say, you did have to build some inventories in there, but is there anything else that we're missing on the ferrochrome division? That's my first one.

Thank you, Tom. And I think when you're asking if you're missing something, then obviously, this was a quarter of sort of starting up things again after having a lower production in the first quarter. And even though we have the positive from the sales price and a bit of boost also from the energy, please remember that on the energy, as we have said, we are also hedged to 2/3 or even up to 70%. So a lot of this was still sort of already agreed upon earlier what cost level we would end up at. So I think kind of on the balance of all of those things and building inventory, this is where we ended up.

Got you. So I guess there's still probably a few cost items that roll off through the second half of the year. And then the second question was just on the timing of some of these investments. I mean, I know you've only just started the feasibility studies, but maybe in the context of you set Phase 3 to start from 2026. Should I read that as that's when the CapEx should start moving up more materially or that's when you start -- we want to be ramping up some of these expansions and raising your sort of EBITDA run rates, in which case, we should expect a bit more of a pickup in CapEx already sort of next year in 2025?

Right. So the factors that sort of drive the timing from our standpoint are, I would say 2 things. One, of course, is the overall readiness that we have the right resources in place. We have finalized our discussions with various equipment suppliers and contractors, and we have just finalized the actual business case ready for decision making. So I don't want to, at this stage give an exact date, but I want to reiterate what I said earlier, which is that our readiness to invest is growing and is fairly high. But the specific timing where it hits the -- what year at this moment, I will refrain from stating more accurately what it could be. So we'll have to come back when we're really ready.

The next question comes from Anssi Raussi from SEB.

I have a few questions. And maybe the first one about Q2 and actually more about Q3. So the last quarter was strong in Americas, but do you think we could see a similar quarter in Q3 as well or how should we think about that one?

Yes. Maybe -- Anssi, maybe if I can start on that one. I think on the market, just even though seasonally, we don't have the same decline as typically in Europe, still sort of waiting for that really sort of restocking sign or signal. Haven't seen that and I would be cautious sort of on just not sort of assuming that there will be some volume pickup yet at this point. And then if we consider cost elements, there were some positive elements on the raw material side in the Q2 that I don't think we can just say they will just repeat. So with that said, on balance, those elements at least I could take into account. And then obviously, we still saw very resilient pricing in the second quarter. We'll have to follow up with the market now how that continues into the third quarter.

Maybe if I can just build on that and just state that 2 things. First of all, for many of our large distributor customers in the U.S., they don't really have that much visibility with respect to their own demand. So many of them supply small quantities of stainless steel and the orders really come and they supply them within 24 hours or 48 hours. So things actually can change quite rapidly. And just as you've been looking at the headlines on macro forecast on the U.S., is the recession coming? Yes, it is, no, it isn't. I mean, it's kind of moving back and forth depending on what analysts is next. I would say it's been a bit the same with the customers that they're a little bit uncertain, should they accelerate or still wait. And so the sort of back and forth situation seems to be also going on in the U.S. News in the last few days have been again a bit more positive. So let's see what autumn will then bring.

Okay. That's really helpful. And then maybe then about the BA Europe, like I understand that you're guiding Q3 to be weak, but maybe to give us some kind of a ballpark here, like are we talking about single-digit numbers in terms of EBITDA or maybe even close to 0 or what kind of ballpark we are looking at here?

Anssi, I think it's a fair question. As we can see that second quarter results were already starting to decline. And then at the same time, we still have a volume drop. And we are operating in a market environment where actual realized prices were falling during the second quarter. And any pickup that we may see right now would just impact more actually into the fourth quarter. So there is a number of, let's say, pressured items. And that is why we really wanted to say very openly that this is a very challenging environment. And I don't want to give a figure, but if we think about sort of COVID, if I recall right, BA Europe was down to a single-digit figure in that third quarter of 2020. And I think the market environment in many senses, the touch and feel here is the same. So there's a lot of similarity.

Okay. And the last one from me is about your annual contracts like can you remind us what kind of pricing mechanisms you have in these contracts? Like are these alloy surcharge and fixed base price based contracts or what kind of structure you have in this?

Yes. There is no one fixed rule. It very much depends on the customer and the end-use sector and also the country. So in Europe, of course, it's been sort of moving a bit back and forth between our surcharge and fixed, and so you've had this in the movements. I would just say, in general, when we fix the contracts, usually you make a commitment on volume, and then you will have different types of volume rebates. But then in terms of the pricing, there are different arrangements depending on the customer. So this is something that as we head into the end of the year, fourth quarter, we will then start to get a better sense for what the world looks like for 2024. Still too early to say at this stage.

The next question comes from Tristan Gresser from BNP Paribas Exane.

I have a couple on the Phase 3 that you started to talk about. Starting off with the U.S., I mean you flagged such a large deficit for the region. And I'm wondering why you're not exploring, let's say, a new greenfield facility with new upstream capacity? And also with the current feasibility study you're looking at on the rolling side, what's the potential volume increase without adding another electrical furnace? That's the kind of the first question.

So I'm not sure if I heard exactly the beginning of the question, but please come back if I don't answer it accurately. But in terms of the current site, so we have plenty of space to expand within the current geographic location. And so it makes sense for us to maximize the scale of Calvert in many respects. We also have a logistics chain from Calvert into Mexico and back. So -- and Calvert is well located also for scrap sourcing. So it's a good place to be. So we really want to scale up Calvert further. In terms of the capacity, if and when we make a decision, for example, on hot rolling, so that amount of capacity is still sort of -- it's still under consideration. Obviously, with the current 900,000 tonnes, that's sort of the minimum level we obviously need just to maintain our existing production, but then to develop the asset further for future expansion, of course, you would need to have more. But that amount is something that when the day comes that we announce a decision we'll then tell you.

Okay, that's clear. So you haven't ruled out necessarily further, let's say, upstream capacity -- or you just looking at rolling?

No. At the moment, as we said here, specifically, the focus is on rolling at the moment. So that is -- that in itself as a project is -- it's a lot of work to do in itself, and it's better to kind of focus on one thing at a time.

All right, that's fair. And my second question is also on Phase 3 a little bit on Europe. Can you give us maybe some early indication of what could be done to improve competitiveness there? And also, interestingly, you also had some potential capacity expansion in Europe. Of course, the market currently is pretty depressed. But I was curious to what you have in mind and what's your view on the medium-term demand outlook in the region that tells you that maybe further capacity may be required? And is it also may be tied to the carbon border adjustment mechanism?

Yes, many very good questions and a very comprehensive list of topics, which are very relevant. I mean, if we kind of look at Outokumpu's assets, as I've said, I mean, we have this unique position with the Crow mine where the investments have now been completed, Tornio and then we have Krefeld and the rest. This, of course, is very much a question. It's always a cost game. I mean these are commodity products on the stainless Europe side and cost competitiveness is key. So obviously, we're looking at all kinds of solutions where we can, of course, produce our variable costs, but also fixed costs. And -- but that work is still so underway that I really don't, and I cannot really open that up anymore. I do, however, want to come back on this carbon border adjustment mechanism because once that is installed, -- it does, of course, mean that for companies like ours with very, very low emissions, it should give us a relative competitive advantage. And with the higher amount of scrap, the chromium, we are well positioned. Under Phase 2, we have said that our plan is already to increase our capacity in stainless Europe, specifically because we are debottlenecking and we're simplifying the portfolio, and we're trying to increase the throughput. So that was in itself already growing the supply volume. And by that sort of a Phase 2 action without putting any major CapEx into that. So just by making things more efficiently, we are able to generate more -- extract more volume out of the existing system. So that's a Phase 2. We're not commenting on Phase 3 anything on volume.

All right. That's fair. And maybe a last one -- I'm sorry, it's all about Phase 3, but it's very interesting. We're not necessarily looking at developing alloys business like certain peers are. I was potentially expecting to see more interest on the Phase 3 when you look at growth opportunities. If you can maybe discuss a little bit why the alloys business as a whole is not necessarily something you consider at this stage?

Yes. We have -- within business area Europe, we have the Advanced Materials business, where we have what we call in our system, the duplex grades, the pro grades in general, which go to more sophisticated complex industrial applications. And that is something that we're developing currently actively, but we see we see sufficient opportunities internally to organically grow that without, at the moment, any major capacity expansion. So we still have work to do there to grow globally in these pro grades. And therefore, they are -- yes, they are a very high focus, but they're not sort of a Phase 3 CapEx thing per se. So America is really the -- Americas, as I said, it's unique in the sense that the big global macro changes, the big trends, I mean, we're basically seeing a pretty fundamental shift in our view globally. And we really want to be riding this big wave as it gradually moves forward over the next decade.

The next question comes from Krishan Agarwal from Citigroup.

On the Americas strategic growth plans, would you help us breaking down the current cost structure? I mean incremental costs, which you are incurring primarily on the logistics for the melting product to go and for the [ Ajar ] to come back? And also, what are the savings you would be expecting if the [ Ajar ] production were to be in-house versus the current arrangement?

Thank you, Krishan. And I think in the current arrangements, we are doing the hot rolling with a partner, but on the same site. So in that sense, the logistic costs are, I would say, perhaps of a smaller nature here. There is something, but I don't think it's sort of something worth sort of describing in further detail here. So overall, of course, we are here also looking for the growth opportunity into the future and considering this. So I do think it's very interesting to think about the cost positioning and the various scenarios. But as this investment is only one scenario, I think maybe then at a later stage, is applicable, we would come back with more details.

I understand. And then moving on to the existing business. In the Americas raw material gains, which you mentioned was one of the source for the better performance. Could you help us as in what is the magnitude of those gains? Because I mean, that will help us to get a perspective on Q3 expectation for Americas?

It's a double-digit figure. It's a low double-digit figure.

Okay. Low double digit. And then the third question, I mean, you mentioned that you have repaid a personal -- sorry, pension loan into the June. Does it mean that the book value of the pension liabilities go down? Or it was just a cause of the loan?

Thank you for asking that. That's a very good question to specify because this is a little bit of a special finish funding type. So this was really a loan. It was in our debt. But you are right that it's connected with pension payments that we have done into the Finnish legally sort of regulated pension system. And then when you have paid like we have, of course, paid pension costs, then we can kind of borrow it back, but it doesn't impact the pension liability that we have on the balance sheet. It was really debt like interest-bearing debt. And it doesn't impact our net debt position because, basically, we have taken down our cash position and repay this loan. And of course, there's a small saving then in the interest rate for us by doing that.

I understand. And then the final question is on working capital. I mean the volumes going lower in the Q3 prices going lower, I mean this is kind of ideal condition for the working capital release. How should we think about the working capital in Q3?

I think your assessment is right. And looking at multiple years of history, yes, maybe there was some anomaly when there was the very COVID rebound. But other than that, I mean, the typical fashion for us is end of Q3 inventory at its lowest when we have been going through this cycle of maintenance breaks, et cetera, and end of Q4 overall working capital, lowest point, and then again, building working capital in Q1 and Q2. And last year, I was pretty specific to say that during last year, we had some changes in the supply chain because of the war in Ukraine and because of change of some supplier relationship. And that's when I said last year that, hey, there's probably like EUR 100 million or maybe even a bit more than that, that really sort of will stick because we have these new arrangements. But this year, we haven't been going through that kind of structural changes. So I would assume that we have the pretty normal annual cycle here for this year.

The next question comes from Bastian Synagowitz from Deutsche Bank.

I just have a quick follow-up on the ferrochrome business and how we should be thinking about the next quarter and Pia you already walked us through a couple of the points here, which, I guess, why the -- which caused the maybe slightly lower than expected performance in ferrochrome in the second quarter. If we think about the third quarter, we obviously have the maintenance break. That's EUR 10 million. We get the price cut, obviously, from the benchmark price, usually, that would be probably another EUR 20 million. That would bring us very close to breakeven, yet in a normal environment at these price levels historically, you've probably made closer to EUR 60 million EBITDA. So could you maybe just help us a little bit to understand the balance of this, should maybe the performance be a little bit more flattish and stable into the third quarter in ferrochrome? Or should we indeed assume that we could flip towards levels very close to breakeven.

I have 2 observations. Thank you, Bastian, for that question. And I think the first observation is that we already benefited from somewhat lower electricity cost. But there was also, unfortunately, a really high level in that earlier. And now it is rebounding, but we had some of these levels already sort of set before. So with that said, I wouldn't expect really between Q2 and Q3, any sort of major boost, but gradually, we will still get some boost from this sort of deflationary impacts and then also our own actions. But they don't necessarily all come yet in Q3. I think when we then go forward to Q4 and a bit into next year, we can still benefit a little bit from this level here going down. So I think that's one thing. And the other thing is, obviously, following in this uncertainty that we have in the market. I think if you follow the spot pricing of ferrochrome, that has been a fairly sort of, what should I say, a depressed story lately. So the market itself doesn't seem very vibrant at the moment.

The next question comes from Harri Taittonen from Nordea.

Yes. Maybe on the topic of the U.S. investments. And could you help a little bit giving sort of layman feel of what the typical unit investment costs would be for cold rolling and hot rolling quick. I mean is it something like $300 per tonne of annual capacity for hot rolling, would that be really -- I mean, just as a ballpark, I mean, is that sort of a fair and cold rolling a bit higher? And related to that, how should we think about the returns? I can see the cold rolling investment being kind of growth oriented and giving a volume boost right away. So I can see the sort of the calculations there. But if -- should we see the hot rolling, then more as a sort of a replacement investment in a way that it's kind of replacing the current sort of setup and therefore, we should perhaps sort of think about the returns from that sort of angle? Or what would be the return hurdles, please?

Harri, thank you. So I think if I think about the hot rolling, I think about it as a mix between what you call the replacement because, obviously, we have an arrangement in place right now and then also an opportunity for growth. But Heikki was talking about this earlier that really defining what the capacity would be, et cetera, that's still something that we are preparing for and would then potentially talk about later. But I think there is this something of an element of growth also embedded in this hot rolling. It enables, of course, then further steps later on, for example. So that's one perspective. And I think we should just really consider that such a hot rolling investment is significant in size. And are we then talking about the size, order of magnitude in absolute terms of even up to EUR 1 billion. These are things that we will need to come back to. But I think that's one way of thinking about it.

Yes, that's good. Maybe I mean no one has asked about the EUR 500 million to EUR 600 million EBITDA in a normalized environment so far. So maybe I can kind of do that then. And how does that sort of assessment sound now with the evidence of the second quarter earnings and your feel on the third quarter? And has something changed there in? Or is that still your current valid assessment?

Thank you, Harri, for that question. And indeed, it is still, I think, mine and our current valid assessment. And yes, we have seen quite a dramatic trough coming up here now. But if you look at the first half results, we are close to EUR 400 million of EBITDA. We are going towards a weaker Q3. Certainly, also in more normal years, maybe we typically have stronger Q1 and Q2 and somewhat weaker Q3 and Q4. So maybe it's even a bit accentuated this year. But I think that assessment is still aligned with our broader view of our company's ability to generate EBITDA in a normalized environment.

Indeed, that is the case.

Okay. Great. If there's time for a third question, I mean, on the price mix overall, sort of interesting both in Europe and Americas that -- well, first of all, in Europe, with the sort of indications of investment slowing among some capital goods companies, at least, I mean, how is the quality mix in the order book developing and your [ pro grades ] share in the total order? I mean how does that sort of balance look like going forward?

If I can just say. I think in the second quarter, there's a -- first of all, I mean, with respect to the pro grades, the whole sector, this whole energy transition to a green economy, that will create demand. I mean there are many, many applications where stainless steel will be used from hydrogen to all kinds of energy type investments. So the outlook longer term looks solid. I think what we have seen here in Q2 was simply, I think, a number of customers on the project side, they are waiting. They're holding off partly because of the significant metal volatility. We saw, for example, moly move up and down. Capital costs have been rising. So for some projects, we could probably have seen that customers are -- the hurdle rate has gone up and they've taken a decision to kind of hold off a little bit. But inherently, I mean, there is a growing need for these investments, and we do think that it creates a good positive, solid background for growth in [ pro grades ], and we are working hard to sell more of that, not only in Europe, but globally because we are really the market leader globally in that sector. Anything you would like to add?

Yes. I'll just add the small detail. As from Q2 into Q3, I think the mix could go a little bit weaker, but it's really a very marginal impact, Harri.

The next question comes from Moses Ola from JPMorgan.

I have 2 questions. I think if possible, please. So the first one, I just wanted to clarify, is your CapEx target for Phase 2 of EUR 600 million still retained if I look at current CapEx to continue to [indiscernible] reduced CapEx for the full year, perhaps we consider it in terms of your Phase 2 target that [indiscernible].

Moses, thank you. And the CapEx for 2023, I think we have now adjusted a bit to EUR 170 million. And I mean kind of continuing on the Phase 2 logic we announced before, then it would mean that this plus 30 would need to land in 24 or into 25. And I think following what Heikki said before, then the timing of those, for example, Americas related investments we would then announce those separately. And of course, we are leaning towards the Phase 3 when talking about those, but then the exact timing, we will need to come back to. So we are now in the Phase 2, EUR 600 million overall situation until we then announce anything else.

And then one thing else I noticed the other targets within now for 2025 for the net 0 target in Kemi how is that currently progressing? And then also the investment for Biocoke is that something that is still valid for Phase 3 as well?

Yes. So the -- first, I'll take the Biocoke question first, but then was it on the energy efficiency. Sorry, what was your first question? I didn't hear it.

So the net 0 target in Kemi by 2025, could you just provide an update to how you're tracking with this, please?

So on the Biocoke, we are continuing the preparation. So obviously, it needs to be balanced with all of the plans that we have here, but we are still now working on the feasibility of that. So we'll need to come back later when we have more updates. And then on the CO2 reduction targets, so you know we have this SBTI targets, and we are following this up every month. So the last time we looked at it, I think we tracked really well vis-a-vis those targets. So we really have a lot of initiatives going on and especially as we added this boost through the energy efficiency, I think we are really well on track, but that's probably also something that we, at some point, need to add a bit more data points to report on those.

We can do that. Yes.

And then finally for me. So your balance sheet still remains net cash even after the pension payment and guided to some reversal of working capital to support that cash position in the second half of the year. So how could we consider potential shareholder returns given your current organization as well for a 10% buyback?

Yes Moses, I think it's a spot-on question given that it's our priority to ensure that we also have sufficient fund for the dividend payments. And given the balance of where we are right now with our cash position, with our net debt position and then the outlook into the second half of the year where, obviously, the EBITDA outlook is now weaker. But at the same time, there are some working capital releases possible. I still remain confident from a CFO's perspective that we are on track with what we said before that we have this stable and growing dividend possible.

The next question comes from Patrick Mann from Bank of America.

I had a couple of questions. The one is just, again, sorry, on the Phase 3 and the U.S. expansion. Is there a scenario where you could build out some of your own hot rolling capacity and continue to use the third-party 900? So as far as I can see that agreement goes until the mid-2030s unless it's canceled. Does any of your own expansion automatically you have to cancel that? Or is it just an easier way to configure the plant? So maybe just if you could help us with that because that could make some -- that could make it growth CapEx to start and replacement later. I'll ask my second question after that one, if that's okay.

Yes. I think, of course, it depends also the -- our contract rollout, of course, they have their own plans and their own needs. So it depends on what they need to do in the future. But I think as we're looking at the investment currently, we are trying to size that so that once we make the investment, that will sort of fit our longer-term needs. Once you start fitting, building it, you don't want to change, come back and change it again, right? So of course, you can build these lines so that you have a certain amount of capacity, and then you can augment it later, and that's also possible. So we're looking at all options in terms of getting to the final level or then some base volume and then expansion potential. So all options are being evaluated.

And then maybe the follow-up is -- and please correct me if I'm wrong. My understanding is your U.S. business is a bit more or quite heavily weighted towards distributors versus the European business. As part of the kind of growth and focus on expanding your U.S. business, do you envision that changing at all? Or do you think you'll continue to service the sort of your existing customer mix?

Yes. We have a very solid customer mix. The U.S. market operates fundamentally very differently from Europe. It's, of course, geographically a huge area. These distributors, they have tens or hundreds of service centers across the country. They provide a 48-hour service with very small volumes. That is something that we can obviously not do effectively. So they have a different service model, different service capability vis-a-vis us. So we do the -- we manufacture the stainless and they do the final service. And I think that model works very well. It's very efficient. Both parties have their own role. So I pretty much envision that we will even further solidify the relationships we have with these distributors try to make -- take out costs from the supply chain, make it more even fluid and efficient in terms of information flow, in terms of being more better at predicting what the demand is so that we can take out cost. So it's a good model, and we intend to further only solidify our relationships with these distributors.

The next question comes from Tom Zhang from Barclays.

Just 2 more, please, from me. On the raw material and metal derivative gains and losses, I guess, for the group, it was a EUR 12 million loss. But within that, Europe was a small loss in Americas was a EUR 7 million gain. So I actually get a sort of EUR 12 million loss that I guess is in corporate. It's a little bit of a housekeeping question, but how should we think about that, is that derivatives? Or is that something else?

Tom, that was derivatives. And I think based on our hedging strategy, typically, our portfolio of hedging is directly allocated to the BAs, but there could be certain market conditions where a certain restricted amount can remain on group, and that is exactly what happened here.

Okay. And then the second one was just on the consumable costs. So sorry, in the presentation, I think you were talking about reduced consumable costs by 15% to 20% for Q4. Could I just confirm that is that a raw materials? Or is it things like electrodes and refractories in those kind of consumables? And is that target excluding the effects of things like -- it's not including the effect of say like magnesium prices and graphite prices moving down, right? It's an underlying change?

No, it's not. It's really the consumables here, like the ones that you mentioned, but maybe also something more practical like packaging materials, et cetera.

Great. Is there any kind of help you can give on the sort of euro amount on that, or?

The quarterly impact still, I think, is a high single-digit number.

The next question comes from Tristan Gresser from BNP Paribas Exane.

I have 2. The first one is on the Q3 guidance, and I appreciate what you said on Europe and ferrochrome as well. But to follow up a little bit on the U.S. I need maybe some help to understand the positive raw material movements you had in Q2. Because if I look at the bridge you provided in the slide pack, the pricing and mix kind of impact in Q2 was EUR 40 million, EUR 50 million. If I look at it, and ASP has fallen during the quarter. So if there was no mix effect that would imply that those positive raw material that you're not seeing in Q3, they're actually closer to 40 million, 50 million and can make quite a big difference if they're not there in Q3. So I just wanted to see if my thinking was correct there. And then I have a follow-up.

So you know that within this bucket of pricing and mix that we have the header on that in -- I know you talk about the variance bridge that we have as an appendix in the material. We also have the direct impacts that sort of the metal buying has into that bucket as well. So there were some of those benefits that we reached, I would say, in a certain market environment that certainly was not tight from sort of a scrap perspective, for example, during the quarter. So that's really kind of the unique event that happened during the fall there, which maybe was a little bit different from just seeing the nickel going up or down or the moly spiking or something like that, that we would actually report separately in the timing and hedging bucket of our variance bridge to be a bit technical here. But EUR 40 million, EUR 50 million is to assume sort of too much. It's one part of that that we have there. And it is a double-digit number, but it's not as high as that.

All right. That's very clear. And the second question is more on the U.S. market. I mean you flagged a strong demand outlook. And at the moment, you see a supply shortage of 400,000 tonnes in normalized market conditions. So the first question is, given this structural deficit, do you still believe that the U.S. market is bound to moderate to correct in light of, I don't know, global pricing development and also, when we look a little bit medium term, can you walk us through the structural demand drivers for the next coming years with perhaps some concrete example? Because my understanding, when I look at those new pools of demand, we analyze it's really still intensive for carbon when you look at infrastructure, the new manufacturing plant. So I'm curious for steel specifically, where do you see those pockets of demand really materializing in the future?

Right. Well, to -- on the back -- second half of your question to keep it very simple, we don't have any supportive material to present today. So happy to come back to that question in more detail in future presentations and specifically when we get to the point of making a decision. But obviously, overall, we see 2 things happening. One is sort of increased repatriation of production from Asia, specifically also into Mexico. Secondly, the economy is growing, so consumption will grow. And then, of course, there is a certain amount of imports where we think that a local strong supplier could provide more production. So like we saw in post COVID rebound, we just ran out of capacity a number of times, and they had to be supplemented with imports. So that is sort of -- those are the 3 drivers, but happy to come back to that question more specifically. And then in terms of this sort of deaveraging or, let's say, coming back to some kind of a long-term equilibrium in the market. I mean, basically, at the moment, what we're seeing is that demand and supply is in a reasonable balance at the moment. And you have these temporary adjustments in inventory, which I think are not really driven by sort of changes in underlying demand but more driven by just customers' uncertainty about whether to accelerate or deaccelerate and that is sort of creating this unnecessary volatility, I would say, in demand. So ultimately, the end-user demand is not tremendously volatile, but this is more just a structural problem in the supply chain and that makes sometimes our business a bit tough. We just have to be able to be agile and scale up and down as the customer’s order but as said, overall, we look at the U.S. in a very positive light, including Mexico, of course.

The next question comes from Maxime Kogge from ODDO BHF.

I just had a question on your guidance for volumes in Q3. If we could have more color by region because you expect them to decrease by 5% to 15% on average. I was wondering whether -- I mean, it was fair to assume Europe would decrease very moderately given that in contrast to [ you go ], seasonal trends, Q2 shipments were actually lower than in Q1 and whether you therefore expect some kind of uptick there or at least stabilization. While in the U.S., they could be falling more sharply?

Indeed. Maxime, thank you very much. And I think when we are guiding 5% to 15% down, that is pretty much sort of the range that we have seen before on the seasonal decline quarter-on-quarter, particularly in Europe. So I think the average when I looked at the long time series was maybe 10% down quarter-on-quarter. And we do see that seasonal pattern repeating in Europe. So there is a decline despite the fact, as you said, that Q2 was already on a low level. But I just don't want to sort of jump to the conclusion that there would be a growth in Americas. I think based on all of the facts that we have discussed in this call. In the short term, there's still some uncertainty. And I would also, for the Americas part, see, the volume a bit under pressure from Q2 into Q3. And our typical way of guiding is that we give this range and we try to give it in a way that we are somehow comfortably in the middle there. But of course, this range is there to allow for some variation during the quarter.

Okay. And perhaps the last question is on the operational group items. So they have been quite significantly positive in late last year. Now they are negative again. Is there some sort of normalized contribution we should assume for them going forward?

I'm sorry, normalized contribution for which items?

For other operations Yes, for the operations and inter-group items.

Yes. So what we have here in other operations, of course, there's like a normalized -- maybe it's like EUR 10 million to EUR 12 million of a certain sort of cost base that remains as sort of a corporate level cost. Then we had one item that was a little bit special. We had this remaining kind of long products operation, which was the [ Degerfors ]. That was still a part of the figure early this year, but the divestment was closed now 2 days ago. So it will no longer be part of the figures going forward. There was a small profit early in this year coming from that. So that will fall off. So we are then back to this cost base of maybe EUR 10 million to EUR 12 million. However, on top of that, there are 2 items that could vary why I cannot give you just one easy figure. The first item is that occasionally, part of the hedging portfolio nickel could land there, should never be anything really significant but happened to be a bit bigger in this quarter. And then the other part is when you are looking at the kind of supply chains that we have, we have some inventory that originated maybe in Tornio and then it went to [ Trenton ] and then maybe to [ Krefel ] before it went to the customer. So when inventory is moving between our own units, we then have to eliminate those margins to make the correct group level figure. And with that said, we have some eliminations and they could vary based on the exact inventory count where it is.

Okay. So EUR 10 million to EUR 12 million per quarter, not per year.

That's the normal cost base per quarter, yes.

The next question comes from Krishan Agarwal from Citigroup.

A quick follow-up or kind of a clarification on the Americas investment. I think my line got blurred when you were answering that on the CapEx expectation, I heard numbers 1 billion. I mean can you clarify, I mean what was the number you mentioned in terms of the potential in?

Number I mentioned. So it was not blurry, but I mean, that's just -- I wanted just to give an order of magnitude figure to consider an investment of the type that we could be contemplating here. But at an investment decision, obviously, we would need to come back with a more concrete figure.

But the $1 billion you mentioned was sort of the right number. I heard it right.

Yes, you did.

U.S. dollars.

Yes. And maybe this is the European way of talking about $1 billion, but I guess that's good internationally as well.

American U.S. billion dollars.

So I hand the conference back to the speakers.

So once again, thank you for joining us for almost 1.5 hours. It's been an excellent and exciting conversation. I'm going to leave you with 3 thoughts. We've had a very good start to the year, but we're obviously going now through a tougher quarter, a bit of a COVID like situation here in Q3. But as I said, we're seeing some positive signs here in Europe, at least in the first weeks of July. Secondly, I've told you our view about the future of the Americas market, both the United States and Mexico. Outokumpu is uniquely positioned. We're 1 of 2 major suppliers. We have a strong industrial base in Calvert. And of course, we're the only one in Mexico, producing stainless steel. So we are looking at options on how to develop that business further during Phase 3. And then finally, we have the strongest balance sheet in the industry. This puts us in a strong unique position to take decisions to develop the company long term when the time is right and when we are mature enough to make our own investment decisions, when the facts are ready, we will then come back to you with more details. I wish you a very, very nice summer. Enjoy hopefully good weather and see you then soon again in Q3. Thank you very much. Take care.